Buy Today: Take Advantage of HIRE Act Tax Incentives

Did you know this is a great time to invest in new machinery? Congress and the President have provided you with additional tax incentives to acquire new machinery right now. The Hiring Incentives to Restore Employment Act (HIRE Act) made it easier to write off your purchase for tax purposes, but the incentives will be in place only for a limited time.

Section 179 of the tax code allows you to write off, for tax purposes, the purchase of items such as woodworking machinery in the year of purchase. Under old law, you would have only been able to "direct expense" the first $250,000 of the purchases and depreciate the balance over several years.

While the provision is commonly referred to as a small business direct expensing provision, it is not limited to businesses of a certain size. However, in addition to the $25,000 limit, under the old law there was a second condition that made it less attractive to businesses of any size. if the aggregate amount for all capital equipment purchased by the business in that year exceeded $200,000, the $25,000 was reduced proportionately. Generally, any depreciable tangible personal property (e.g., machinery) used in an active trade or business is eligible for direct expensing treatment.

The HIRE Act makes two important changes in Section 179.

• The direct expensing amount is increased to $250,000.
• The aggregate personal property purchase base at which point the direct expensing begins to be reduced has been increased to $800,000.

You need to act now. The increases are only in effect until the end of this year. At that point, the amounts will revert back to their lower limits!